JRB Realty C. v. Makati Commercial Estate Association, Inc.

[SEC-SICD * CASE NO. 3795. February 28, 1994.] JRB REALTY C. , petitioner , vs .MAKATI COMMERCIAL ESTATE ASSOCIATION, INC. , respondent . D E C I S I O N This is a petition which originally sought to enjoin respondent lot owners' association corporation from submitting for the approval of its members at an annual membership meeting, a proposal for the consolidation and revision of certain deed restrictions of said association. A supplemental petition was thereafter filed in view of the fact that said matter was eventually submitted and voted upon, so that, the principal relief sought was modified to declare the association's approval of the revisions as ultra vires . Based on the pleadings, and evidence, both testimonial and documentary, filed and presented by the parties; the pertinent facts of this case are as follows: Respondent Makati Estate Association, Inc. ("MACEA") is an association of lot owners, lessees and occupants of lots situated in the so-called Makati Central Business Districts ("(MCBD"),including that portion known as Salcedo Village. The said lot owners or their successors-in-interest, automatically became members of MACEA on the basis of a provision to that effect contained in the Deed Restriction attached to the Deeds of Sale executed by them with the owner-developer of the MCBD, Ayala Corporation. Petitioner, as the owner of two lots in Salcedo Village, is a member of MACEA (Exh. "B-1/2 - MACEA).Petitioner admits intervenor Ayala Land, Inc. ("ALI") is also a member of MACEA in its capacity as the successor-in-interest of Ayala Corporation, the owner-developer of MCBD. Sometime in early 1989, within the term of effectivity of the erstwhile Deed Restrictions (hereafter the "original DEED Restrictions").ALI submitted to the Board of Governors of MACEA ("MACEA Board"),a proposal for the revision of the original Restrictions governing the constructions and use of structures to be built on the MCBD lots. In essence, the revision sought the abolition of direct height restrictions to be replaced with "floor area ratios",with the effect of allowing lot owners to increase the total floor areas of their buildings or to construct building with floor areas greater than those allowed by the original Deed Restrictions. The MACEA Board then endorsed, the proposal to the Association's individual members, including petitioner, for comment. Petitioner informed the MACEA Board of its opposition thereon on May 26, 1989 (Exhs. "G-2"),on the ground that the proposal had an affair effect on the members who already built structures on their lots in substantial compliance with the original Deed Restrictions. Petitioner further expressed its legal position that no less than the consent of all the parties to the Deeds of Sale of the lots (which did not include MACEA) was needed in order to effect revision not the mere say-so of the members of MACEA, as such members. The MACEA Board eventually decided to favorably endorsed the matter for direct approval by its members. An annual meeting of the association was scheduled for April 5, 1990, and the members were notified that among the items to be taken up was ALI's aforesaid proposal. However, the said meeting did not push through, but was reset to June 14, 1990. On June 8, 1990, however, this Commission in response to an application made by petitioner issued a temporary restraining order enjoining MACEA only from submitting the proposal to adopt "Consolidated and Revised Deed Restrictions" (hereafter "CRDRS) to its members, MACEA cancelled said June 14, 1990 meeting subsequently. On June 23, 1990, this Commission denied petitioner's application for preliminary injunction MACEA eventually held its annual membership meeting on July 11 and 12, 1990. The resolutions were approved by 403 out of 476 members present or represented at the meeting. Petitioner did not cast the two (2) votes to which it was entitled. On August 14, 1990, a Supplemental Petition was filed in this case praying, as earlier adverted to that judgment be rendered declaring null and void and without any legal effect, the said approval of the CRDRS, citing among others, alleged rampant irregularities which supposedly attended the July 11-12, 1990 MACEA annual membership meeting. On February 19, 1991, preliminary proceedings were held and, in a preliminary conference Order dated February 28, 1991, this Commission defined the sole genuine issue in this case to be, whether MACEA is empowered or can legally and validly charge/amend and/or revise the original Deed Restrictions. Upon a judicious consideration of the evidence and the arguments raised by the parties and by the intervenor, this Commission is of the opinion that MACEA's action of adopting the CRDRS cannot successfully be attacked as an Ultra Vires act. It is well-settled, as it is a statutory adjunct, that a corporation may exercise not only powers which are expressly vested upon it by law or by its Articles of Incorporation, but also those which may be essential or necessary to carry out its purpose or purposes, as stated in the Articles of Incorporation" (Section 36 (11), Corporation Code of the Philippines). dctai MACEA's Amended Articles of Incorporation (Exh. "C") pertinently enumerate its corporate purposes to be as follows: "SECOND That the purpose or purposes for which such corporation is formed are: To promote the general welfare, property, service and reputation of the Ayala Avenue Paseo de Roxas Administrative Office and Commercial area; and To promote the best interest and well-being, as well as safeguard the welfare of the owners, lessees and occupants of property in the Ayala Avenue-Paseo de Roxas Administrative Office and Commercial area in the Municipality of Makati, Province of Rizal and which area is described and identified in following plans. In addition to the above, the Association is also organized subject to existing laws: 1. To adopt such measures as may be necessary for the protection and safeguard of the members of the Association and their property, consistent with law; 2. To make and adopt such rules and regulations as may be required and necessary to implement the restrictions concerning the use enjoyment and occupancy of all the property in the area. 7. To enforce the covenants, restrictions, servitudes, assessments, liens and charges which exists or may hereafter be imposed for the benefit of the property in the area which the Association has jurisdiction: to pay all expenses incidental thereto; to enforce the decisions and rulings of the Association over any of said property, and to pay all the expenses in connection therewith. 10. To enjoy such other powers as are requisite and necessary or incidental to those herein before mentioned" (Exhibit "C",in relation to Exhibit "X-A";Emphasis Supplied). MACEA's By-laws also pertinently state: "SECTION 10, ARTICLE III The presence of members, representing the majority vote of the association will constitute a quorum to transact business in all meetings of the Association. A lesser number of votes may adjourn the meeting from time to time and may take up social or ceremonial matters only which shall not be valid for any other purpose" (Exh. "C",in relation to Exh. "4-A"). SECTION 2, ARTICLE IV The Board of Governors shall exercise all the powers expressly granted by these by-laws and the Corporation Law and shall do all such lawfull acts and things as are not by statute or by the Articles of Incorporation prohibited or by these By-Laws, directed or required to be exercised or done by the members of the Association. The Board of Governors shall also be vested with power to enforce deed restrictions and adopt lawful rules and regulations, with or without penalty, governing the use and occupancy of buildings and premises in the area, as well as the conduct of business and proper therein. The Board may delegate, in whole or in part, such power as it may deem necessary and proper, by means of resolution adopted for the purpose to show, to any Governor, member or committee of the Association". (Exhibit "C", in relation to Exhibit "4-B"). MACEA is expressly vested by its Articles with the general power of promoting the "general welfare, property, service and reputation" of the Makati Central Business District, as well as the "best interest and well-being" of its members. Specifically, MACEA also expressly enjoys the powers of adopting "such rules and regulations as may be required and necessary to implement the restrictions and of enforcing such restrictions "which exist or (which) may hereafter be imposed for the benefit of the property in the area (over) which the Association has jurisdiction". Specifically, it is vested by its by-laws with the power "to enforce deed restrictions and about lawful rules and regulations with or without penalty, governing the use and occupancy of buildings and premises in the area, as well as the conduct of business and activities therein". Insofar as a revision of the original Deed Restrictions has the effect of promoting the "general welfare, property, service and reputation" of the area under MACEA's jurisdiction, as well as of furthering the "welfare . . . best interest and well-being" of the lot owners, lessees and occupants in the same area, the same is validly exercised by the Association as an implied power necessary to carry out its aforestated express. general purposes (Republic of the Philippines vs. Acoje Mining Corporation, Inc., G.R. No. L-18062, February 28, 1963. It must also be noted that the Deed of Restrictions themselves reiterate that MACEA is empowered to enforce the same and to lay down "rules and regulations . . . . in the interest of security, maintenance, beautifications and the general welfare of the (area)". Moreover, they declare it to be the lot owner's obligation to abide by the said actuations of MACEA. It is significant to note that in the May 22, 1990 letter of the MACEA president indorsing the approval of CRDRS and in the "Summary and Rationale" (updated May 21, 1990) attached thereto (submitted by petitioner as its Exhibits "0" and "0-II), it was stated that the revision of the Deed Restrictions was intended "to promote the continuing economic development of Makati" and that it would promote the general welfare, property, service and reputation" of the area under its jurisdiction. As it cannot be denied that MACEA's power of enforcement of the Deed Restrictions is intertwined with its express, rule-making function, since MACEA may issue rules and regulations in implementation of said restrictions with the ultimate end-in-view of preserving or promoting the best interest and general welfare of the MACEA administered area and of its members, then such act of approving the CRDRS falls within the MACEA's exercise of its implied (and even express) powers. This Commission is not unmindful of petitioner's basic contention that, as the original Deed Restrictions were imposed by virtue of contractual stipulations in the Deeds of Sale of the lots by ALI's predecessor-in-interest, Ayala Corporation (or in proper cases by ALI itself) to individual lot buyers, then MACEA does not possess the authority or prerogative to change, amend or revise the individual contracts/restrictions it not being a party to the Deeds of Sale. Hence, while petitioner concedes that MACEA may enforce the restrictions, MACEA purportedly has no prerogative to revise them. But it must equally be conceded that, in implementing the will of the overwhelming majority of its members adopting the CRDRS, MACEA is not imposing the CRDRDS on all its members, including those who cast negative votes or like petitioner, did not vote on the measure at all. Evidence disclose that MACEA has issued guidelines on the matter of annotating the CRDRS only on the titles of those who voted to approve them and of those who subsequently accept the same. (MACEA Memorandum Circular No. 90-04) (August 17, 1990, Exh, R, R-1).As to the minority who cast no votes and who abstained, the original Deed Restrictions continue to contractually govern, as they remain annotated on their titles. Thus, by petitioner's own theory of contractual privity, to the extent that petitioner's supplemental Petition prays for the declaration of nullity of the act of approval of the CRDRS, petitioner may not prevent MACEA from enforcing the CRDRS against the vast majority of its members who voted in favor of revision. Intervenor has correctly analyzed that what is actually being challenged in this case is not respondent's supposed act of imposing the CRDRDs on all its members (even on those who rejected or did not vote for the same).It is MACEA's act of determining which members are willing to accept the CRDRS, in lieu of the original ones, and of enforcing the CRDRDS only as against those who accept, that is actually being challenged. If by petitioner's theory or privity, the majority of MACEA's members cannot follow the CRDRS, why should the minority or petitioner, be allowed to prevent the majority from adopting and following the CRDRDS which they have voluntarily approved? LLphil In fact, petitioner does not dispute that it is the right of individual lot owners to approve the CRDRS insofar as their lots are concerned. (TSN, August 28, 1991, pp. 12-13).In this sense, petitioners must be held estopped to assail the majority's act of revision. Moreover and incidentally, petitioner should also be held equally estopped to deny being bound by the majority's actuation. In its Position paper or the issue, addressed to MACEA (Exh. I),it maintained that the issue should be resolved on the basis of the will of the majority. That majority including, apparently, the 80.57% of lot owners whom it claimed would be discriminated against for having already erected buildings in substantial compliance with the Original Deed of Restrictions has spoken in favor of revision. Petitioner also contends that no less than the unanimity of all the lot owners should be obtained in order that the revision should be considered valid, else intervenor or its successor-in-interest could be held liable for damages to those who withhold their consent. While the latter concern is of course outside the purview of the instant case, it may be well to note that as intervenor has pointed out, the Deed Restrictions do not constitute an ordinary contract governing the relationship of only the immediate parties to the individual deed of Sale. As correctly characterized, it creates a "network of contractual relationship or of cross easements or cross servitudes between Ayala and individual lot owners, among the latter, and between Ayala and the Community in general for the purpose of maintaining usage of all lots in accordance with a general pattern of development. In this sense, the individual lot owner would, in principle, have the right to sue to enforce the Deed Restrictions. But since they agreed in the very same original Deed Restrictions to vest such power of enforcement in MACEA and in Ayala Corporation (now ALI) and also undertook to abide by pertinent rules and regulations to be laid down by MACEA, as the lost owners' representative. Neither do we find merit in petitioner's argument that Section 22 Presidential Decree No. 957 effectively prohibits a home/lot owners' association such as MACEA, from changing/altering the restrictions on use and occupancy of lots. While it is true that said provision of law requires the consent of the Association in the alteration of plans pertaining to roads, open spaces, infrastructure and facilities for public use, we find nothing in the same law which prohibits the Association from agreeing to revise matters not expressly mentioned therein, such as deed restrictions. Petitioner's belated claim that there was "rampant irregularities in the ascertainment of the quorum at the meeting and voting ...Item 8 of the agenda ...is beyond the issue agreed upon by the parties to be resolved in this case. Besides, petitioner's attempt to substantiate this claim during the hearings over the objections of intervenors, have not succeeded in showing how the alleged irregularities affected the ascertainment of the quorum and the outcome of the voting at the meeting. WHEREFORE, premises considered, this Commission DISMISSED the Petition and Supplemental Petition. LLphil Likewise, for insufficiency of evidence, respondent's compulsory counterclaim and the Intervenor's compulsory counterclaim are hereby DISMISSED." No pronouncement as to costs. SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer